Business Context and Reporting Period
This Form 6-K filing by Energy Company of Minas Gerais (Cemig) covers the period ending April 6, 2016. The filing aggregates various corporate announcements, board meeting minutes, and the full-year 2015 financial results. Key operational segments include electricity distribution (Cemig D), generation and transmission (Cemig GT), and gas supply (Gasmig). The company operates primarily in Brazil, with securities traded in São Paulo, New York, and Madrid.
Key Financial Metrics (2015 Full Year)
| Metric | 2015 Value | 2014 Value | Change |
|---|---|---|---|
| Net Revenue | R$ 21.29 billion | R$ 19.54 billion | +8.97% |
| EBITDA | R$ 4.95 billion | R$ 6.38 billion | -22.36% |
| Net Income | R$ 2.49 billion | R$ 3.14 billion | -20.56% |
| EBITDA Margin | 23.27% | 32.66% | -9.39 p.a. |
| Net Debt | R$ 11.73 billion | R$ 11.61 billion | +1.05% |
| Electricity Sold | 56,904 GWh | 63,470 GWh | -10.35% |
Cash Flow: Cash generated from operations was R$ 3.01 billion in 2015, down 19% from 2014. Total debt increased to R$ 15.17 billion by year-end 2015.
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 9% despite a 10.35% drop in electricity volume sold. This was driven by tariff adjustments (Annual and Extraordinary) and the introduction of the "Tariff Flag" mechanism, which increased average prices significantly.
- Profit Decline: Net income fell 20.6% primarily due to a R$ 1.079 billion provision for losses on investments, specifically related to put options on shares of Parati (FIP Redentor) and SAAG (Santo Antonio Investment).
- Operational Costs: Total operational costs rose 26.8% to R$ 18.32 billion. Key drivers included a 28.5% increase in electricity purchased for resale (due to higher fuel costs and exchange rates) and a 141% increase in operational provisions.
- Stock Performance: Cemig shares underperformed the Ibovespa in 2015, declining approximately 52% for both common and preferred shares, influenced by the Jaguara hydroelectric plant legal judgment and macroeconomic conditions.
Guidance, Outlook, and Material Events
- Dividend Proposal: The Board proposed allocating R$ 634 million of the 2015 net profit as minimum obligatory dividends. Due to cash flow limitations, R$ 200 million will be paid as Interest on Equity, while R$ 434 million will be paid as dividends by December 30, 2016. A portion of the dividend (R$ 634 million) is being held in a reserve to be paid when the financial situation permits.
- Shareholder Structure Change: On March 3, 2016, BNDESPar exchanged debentures for Cemig shares, increasing its total equity interest from 0.75% to 6.4% (12.9% of common shares). This was a material stock transaction.
- Renova Energia Transaction: On April 1, 2016, the sale of the ESPRA project to Terraform Global was rescinded. Renova received a US$ 10 million break-up fee. Renova intends to exercise an option to sell 7 million Terraform Global shares to SunEdison.
- Corporate Governance: A joint Directorate for Compliance and Corporate Risk Management was created in March 2016 to strengthen governance practices.
- Legal Risks: The filing notes ongoing reconciliation proceedings regarding the Jaguara hydroelectric plant concession, which was previously the subject of a judgment against Cemig.
Investor Verification Checklist
- Dividend Timing: Verify the actual payment dates for the proposed dividends and Interest on Equity, noting the deferral of a significant portion to a reserve.
- Investment Provisions: Confirm the status of the R$ 1.245 billion provision for the Parati put option and the R$ 148 million provision for SAAG, as these significantly impacted 2015 earnings.
- BNDESPar Stake: Monitor the implications of BNDESPar's increased 6.4% stake on future corporate governance and strategic decisions.
- Renova/Terraform Deal: Track the execution of the share sale option to SunEdison and the valuation of the ESPRA project assets retained by Renova.
- Jaguara Plant Litigation: Review updates on the Federal Supreme Court appeal regarding the Jaguara hydroelectric plant concession termination.